Tax Facts

Information to help individuals and small business navigate our complex Tax Laws. Not to be construed as tax advice. Contact your hired tax advisor for your specific tax situation and advice.

Property That's Not Eligible for Depreciation


Rules apply (of course!) when you want to deduct long-term assets in a business and on your business tax return. If it's property - real property, personal property, or otherwise - you can only depreciate or expense the cost of purchasing that property if it's used in your business and if it wears out or gets used up over time.

So, for example, if you have a rental property and it's a single-family house on land, you can only deduct (and in this case it becomes a depreciation deduction) the house portion of what you purchased and not the land. Land does not wear out. (There are exceptions to this when you are purchasing land specifically for oil drilling - then you have a deduction each year for the depletion of that oil in the land. But that's a different and special case.)

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Taking Deductions for Your Leased Vehicle

If you use your vehicle for business purposes and you lease this vehicle, you may be wondering if you can deduct the lease payment on your business tax return. If you are a sole proprietor or single member LLC, you may choose to lease your business vehicle and the business percentage of use - and the lease amount - is deductible on your business tax return (Sched C).

But it doesn't end there! IRC Section 280F(c)(2) requires that the proprietor include the deduction amount as rental income for the vehicle (essentially as if you are renting that business portion to the business). It is sometimes referred to as an offset of that deduction or the "leased vehicle income inclusion."

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